Good morning, everyone, and welcome to PageGroup's 2019 Interim Results Presentation. I'm Kelvin Stagg, Chief Financial Officer; and I have with me Steve Ingham, our Chief Executive Officer. Although I will not read it through, I would like to bring your attention to the cautionary statement included at the end of this presentation. I will start with a brief review of our financial results for the first half, continue with an update on our capital allocation strategy and shareholder returns and conclude with a summary. Following this, we will open up the call for Q&A, when Steve and I will be happy to take your questions.

For the first half, the group delivered gross profit of GBP 433.5 million, up from GBP 396 million in 2018, a record for the group. In both constant currencies and reported rates, this represented an increase of 9.5%. These results were achieved despite a tough comparator and more challenging conditions seen in a number of our markets, including France, Greater China and the U.K. In our Large, High Potential market, we delivered growth of 16%, collectively, with all 5 markets, Germany, Greater China, Latin America, Southeast Asia and the U.S., delivering record gross profit.

Our operating profit for the first half was GBP 75.6 million, up from GBP 67.2 million in H1 2018. In constant currencies, this represented growth of 11.4% or 12.5% in reported rates. Our conversion rate was 17.4%, up from 17% in H1 2018. This improved business performance resulted in an increase in basic earnings per share of 8.4% on the first half of 2018 to 16.8p. Following an outflow of GBP 29 million in June to pay our 2018 final dividend, we closed the quarter in a strong financial position with net cash of around GBP 81.7 million. Today, the Board has announced an increase in the interim dividend of 4.9% to 4.3p per share, giving an interim dividend total cash payment of GBP 13.9 million.

In line with our policy to return surplus cash to shareholders, the Board has also announced a special dividend of 12.73p per share in line with 2018. This represents an additional return of GBP 41 million. Both the interim and special dividends will be paid on the 9th of October to shareholders on the register on the 6th of September.

Following a record first half of both gross profit and operating profit, the group's conversion rate improved again from 17% to 17.4%. The creation of our Chief Operating Officer appointment last year was to focus strategically on improving productivity by innovation, technology and people. This focus has resulted in an increase in fee earner productivity of 2.2% with improvements seen in all of our regions.

Looking at each of our regions, starting with EMEA, our largest, gross profit grew 10.2%, and we delivered a 0.4 percentage point increase in conversion to 21.4%. This was driven by a combination of improved fee earner productivity, which was up 3% in constant currency and continued benefit from our European Shared Service Centre.

In Asia Pacific, we grew gross profit by 9% and saw a marginal improvement in fee earner productivity of an 0.5%. We experienced more challenging conditions due to the trade tariff uncertainty in Greater China. And as a result, our conversion rates fell by 1.3 percentage points to 10.8%.

In the U.K., gross profit declined by 0.3%, with Brexit-related uncertainty continuing to impact decision making from clients and candidates at the more senior levels of the market. A combination of slightly lower fee earner headcount and a continued focus on customer centricity led to an improvement of 2.1% in fee earner productivity. This drove a 3 percentage point increase in our operating profit conversion rate from 15% to 18%.

Finally, to the Americas, our fastest-growing region, where for the first half, we grew gross profit by 19.6%. Generally, strong macroeconomic conditions and slower fee earner headcount growth drove an improvement in fee earner productivity of 3.1%, and our conversion rate increased from 11.9% to 12.5%.

As you would expect in a people business, employment costs are by far the largest settlement of our cost base, representing 79% of total costs. This percentage has remained broadly the same for a number of years. Our employee costs include wages, bonuses, share-based long-term incentives and training and relocation costs. Along with annual inflation in pay rises, our average head count investment of 6.6% drove the increase in our employment costs, which were up 9.3% in constant currency.

[At the end,] head count fell by 81 in the first half, mainly in markets where we still have more challenging conditions, such as Greater China and the U.K. We completed the implementation of our new global finance system with rollouts in Latin America and Europe during the first half. Operational support staff headcount increased by 72, the majority of which were temporary to support these rollouts.

Following the reduction in our fee earner headcount and our increase in support staff as fee earner to operational support staff ratio reduced from 79:21 at the end of December 2018 to 78:22. We continue to target a ratio of 80:18 as per our Page Vision.

Other costs have increased by 8.8% compared to H1 2018. Majority of these costs relate to property and business technology. We focused on managing these costs through having a variable IT cost base and a flexible short-term lease portfolio. Under the new accounting standard, IFRS 16, leases that were previously classified as operating leases are now required to be recognized as right-of-use assets on the balance sheet with a corresponding lease liability. The lease expense previously recorded on a straight-line basis is now replaced by depreciation and an interest charge. We have applied the modified retrospective method of adoption where the standard is applied retrospectively with an adjustment to reserves on transition. The adoption of IFRS 16 on the 1st of January resulted in a reduction to opening reserves of GBP 2.1 million.

At the 30th of June, right-of-use assets of GBP 129.5 million and lease liabilities of GBP 138.5 million were recognized on the balance sheet. Under IFRS 16, the straight-line rental expense for the first half of GBP 20.4 million has been replaced with a depreciation charge in respect of the right-to-use assets of GBP 19.6 million. This has resulted in an increase to EBITDA of GBP 20.4 million and an increase to EBIT of GBP 0.8 million. An interest charge in respect of the lease liabilities of GBP 1.1 million has also been recognized, resulting in a decrease in profit before tax of GBP 0.3 million.

The group's balance sheet remains strong. Intangible assets increased by GBP 3.1 million compared to H1 2018 mainly due to capital expenditure on our new Global Finance System, where we have had rollouts in Europe and Latin America during the first half and other operational system investments.

As mentioned previously, under the new accounting standard, IFRS 16, right-of-use assets of GBP 129.5 million and lease liabilities of GBP 138.5 million have been recognized on the balance sheet. After returning GBP 82.9 million to shareholders by way of ordinary and special dividends over the last 12 months, net cash was GBP 81.7 million. Overall, net assets have increased from GBP 304.4 million to GBP 351.1 million.

This slide sets out some of the other cost items for the first half. Combined depreciation and amortization increased from GBP 9.5 million in H1 2018 to GBP 29.9 million, primarily due to depreciation on right-of-use assets of GBP 19.6 million. The amortization charge of GBP 5 million relates primarily to PRS, our global operating system and the Global Finance System.

Net capital expenditure increased from GBP 10.8 million in H1 2018 to GBP 13.4 million in H1 2019. Spending on tangible assets decreased by GBP 1.8 million as there were fewer office moves compared to H1 2018.

Technology-related capital expenditure for our operational support project increased by GBP 4.4 million as we completed the rollout of GFS and progressed the design and planning to upgrade our CRM system. As these CRM plans become more certain, we will update you on this in more detail later in the year.

This chart lays out the movements in and uses of our cash during the first half. Our working capital requirements increased by GBP 45.8 million, broadly in line with H1 2018. And as previously mentioned, this was driven by an increase in temp and contracting turnover but also the acceleration of creditor payments ahead of GFS go-lives in France and Southern Europe.

Tax and net interest payments were GBP 20.7 million, and net capital expenditure was 13.4 for the first half, as previously described. Payments made in relation to lease liabilities reduced cash by GBP 20.7 million. In the first half, employees exercised 0.9 million share options, which generated GBP 3.5 million of cash, down from GBP 19.1 million in the first half of 2018 due to the lower share price.

The remaining large cash outflow was dividends paid of GBP 29.0 million. The overall impact of these cash flows was to decrease the group's net cash position by GBP 16 million to GBP 81.7 million at the end of June.

I will now outline the group's strategy for its use of capital and related returns to shareholders. PageGroup operates a highly cash-generative business model with very high levels of cash conversion. We have a clear capital allocation strategy with 3 defined uses of cash. The first and primary use is to satisfy the operational and investment requirements of the group, which also includes the hedging of liability under the group's employee share plans. The second use of cash is for the payment of ordinary dividends, where it is the group's policy to maintain these through a downturn and increase them when conditions are more favorable. Thirdly, and finally, any remaining cash surplus is distributed to shareholders by way of a supplementary return either by the buying back and cancellation of shares or by special dividend, as has been the case for the last 4 years.

The group has always recognized the importance of maintaining a strong balance sheet and the benefits to shareholders of dividends and capital returns. As shown here, historically, the group has returned cash to shareholders by buying back and canceling its shares.

In the 18 years since floatation the group has returned over GBP 275 million through share buybacks and canceled around 25% of its issued share capital. This is on top of paying nearly GBP 600 million of ordinary and special dividends during the same period. As mentioned previously, group core has concluded that it currently holds surplus capital, and therefore, we'll return cash to shareholders.

With current net cash of around GBP 81.7 million, today the group announced an interim ordinary dividend of 4.3p per share, an increase of 4.9%. In addition, we also announced the supplementary return to shareholders by way of a special dividend of 12.73p per share, totaling GBP 41 million, the 5th consecutive year of special dividends. Together with the interim dividend, this amounts to a cash return to shareholders of GBP 54.9 million. These dividends, together with the final dividend for 2018 paid earlier in the year of 9p per share, give a total cash return of GBP 83.9 million. This gives us a combined dividend yield of 5.8% based on a share price of GBP 4.50. The special dividend will be paid at the same time of the interim dividend on the 9th of October to shareholders on the register as at the 6th of September.

I will now finish with a brief summary of the first half. Overall, the group delivered a record gross profit and grew 9.5% in constant currencies. Our fee earner productivity increased by 2.2% in constant currency with improvements seen in all of our regions. Operating profit increased 11.4% in constant currencies to GBP 75.6 million. Our conversion rate improved from 17% in H1 2018 to 17.4%. As I've just mentioned, today, the group announced an interim dividend of 4.3p and a special dividend of 12.73p, a 5th successive year for special dividends. We're pleased with the first half performance. However, we remain mindful of challenging macroeconomic conditions seen in a number of our regions.

We will continue to focus on driving profitable growth, while continuing our strategic investments towards our vision of 10,000 head count, GBP 1 billion of gross profit and GBP 200 million to GBP 250 million of operating profit.

That concludes the formal presentation for this morning. And Steve and I are now happy to answer any questions you may have.

I just got 3 questions. First, can you just give us a feel of the dip in July compared to what you've seen in Q2? And any kind of difference within the regions or within your former temp business? Second is, how is the head count provision has been so far in Q3? And finally, in the U.K., the conversion margin has benefited from the lower share charge. So if you just kind of give us an impact of that to get us a feel of the underlying improvement in the conversion margin that is? And what should we expect for 2H?

Yes, let me answer the first 2, and I'll leave Kelvin to the third. It's Steve here. This is actually our half year results rather than the July trading update. So unfortunately, we're not going to give you color on 1 month because I think if we start to give trading updates month by month, we are going to get into a ridiculous situation of explaining, I don't know, bank holidays, who went on holiday where and so on. So if there was anything exceptional in July. Obviously, we'd be saying something. So assume it was an okay month. But beyond that, we're not going to give any more detail.

Yes. On the U.K., the improvement in the U.K. in conversion was 3%. Roughly half of that was a lower share plan charge than we saw in the first half of last year. The other half was an improvement in underlying trading largely due to having a slightly lower cost base and a slightly lower U.K. headcount rather than particularly on the actual revenue side.

I can appreciate it, don't want to give the update on July numbers. I just wanted to get a feel of what July was than June or that things have been stable, that's all. If you can give us a comment on that, that would be great.

And like I say, we're not going to update on July. If it impacted our ability to hit the numbers that we indicated at the trading update, then we'd obviously be saying something. So July was fine, but we're not going to start giving the granularity literally by month.

Just one quick one for me on the Americas, if I may. Obviously, the conversion ratio, we saw the improvement year-on-year. You're obviously continuing to invest for growth in this region. So can you maybe sort of give a bit of steer as to what the medium-term target is in terms of where you think this region could get to in terms of conversion ratio, just so I can sort of think about how it might look, I don't know, once that sort of ramp-up in investment in head count has sort of come to a bit of an end.

Yes, it is an interesting one. First of all, technically looking at it, we believe that the conversion rate, ultimately in the Americas could be the same as everywhere else. It's a good market, and we've certainly achieved very high conversion rates, where we've got our maturest parts of the Americas, if you like. So in New York, for example, and when Brazil was flying a few years ago, again, we achieved very high conversion rates. And because we've had consistent growth now over a few years in Mexico, again, we're achieving very high conversion rates. So in terms of, ultimately, we feel we can achieve the same as the group average, and we know where that's been in historical terms.

You're right, though. These are 2 high-potential markets for us, Latin America and the U.S. And so we are investing heavily. And in Latin America, we've taken the head count forward a long way over the last few years. And we've also been opening several new countries. The last was Peru a few years ago and already that has an improving conversion rate. So it's only held back by that investment that we're making rather than any fundamental structural difference or anything else that exists in the market. And it is that fine balance between investments in the good years and trying to keep a good conversion rate at the same time. But ultimately, we aim to get to the same as the group average. And of course, as we get bigger, we're diluting the impact of the investment of head count, and we certainly see no need to open new countries in Latin America in the short to medium term. And in the U.S., again, we see no need to open new offices in the short to medium term. So it will just be about head count over the next few years. But like I say, that's getting diluted as our head count gets bigger in the...

I've got 3 as well, please. Since your last update, Steve, there's been more tariff threats from Trump. If you look at your Chinese business, is the seasonality quite similar to the rest of the group, i.e., the August is actually a very quiet month and September would start to give us a clearer idea of trading? That's the first. The second is next is probably you, Kelvin, you've gone through the half -- a set of half year numbers now, has the Global Finance System performed as you would have expected? And then the last one is, you made a comment just there. I think you said it was on the CRM system. It made it sound like you're expecting some additional CapEx. Is that the message you are preparing us for?

Let me just take the China one to give Kelvin time to think on that. August, September, I mean, the only thing I would comment on China, we had a very, very exceptional Q3 last year. And we grew over 30% in China. So our comps are going to be very tough going into Q3. And yes, the tariff was certainly [beyond] abating, and therefore, there is plenty of uncertainty in China and particularly from international companies, of which we -- roughly 70% of our business exists. So -- and I guess this is the first time for us in Mainland China that we've gone through any significant slowdown. We've had many good years, and therefore, a lot of our consultants, managers and directors will be going through more challenging market conditions for the first time. And obviously, we've got to prepare them for that rather than somewhere like the U.K., where we've been through it over decades because it's a mature business. I would add to that, but of course, Hong Kong at the moment is not an easy market. And there's been a lot of disruption, not just from the sort of a civil unrest there and so on, which doesn't seem like it's going to switch off anytime soon. But on the closing days of July, we also had a typhoon, and so both of our offices in Hong Kong had to close. So yes, we've got some challenges, a difficult comp, some uncertainty with international clients, particularly, and Hong Kong. But beyond that, Q4, I think will get easier. But August and September, they're not particularly slow months. No. Like I say, we had a good Q3 last year. And we're trading hard at the moment. It continues also, I would say, to be a high potential market for us. So in the medium to long term, we still want to be big in China as we already are, and we will continue to invest.

Starting on the Global Finance System. Yes, we had a very busy first half. We went live in Latin America in February, Northern Europe and the [docks] region in Germany, Austria and Switzerland went live in April. And we've just gone live in France and Southern Europe in July. Actually, on the whole, all of them went pretty well, particularly the European go-lives have gone extremely well. Lat Am is a very complex region, and we've got some challenges around some of the localizations that we've got in place there. But no, generally, we closed the half year very normally. And I don't have any concerns about that system going forward. So we've got a very small amount of work to do to bring some of the group companies on, which we'll be doing once the half year is out of the way. And I expect the loss of the capital investment on that to be relatively small, and it will stop in September. Well spotted on the CRM. We are in the process of planning and reviewing, replacing the CRM element of what was our old PRS system. So a number of the other programs and systems that sit around our current CRM will remain going forward, but we will replace the central CRM system with one based on Salesforce. We already use Salesforce in the business for a number of our B2B and B2C systems, things like Thunderhead that you would have heard us talk about previously. And so we're currently putting together the plans and the rollout plans for that. There will be CapEx involved. I don't actually know a firm number at the moment, so I'm not going to get into the numbers or the timing of it. But we hope to have a much clearer plan by the end of the year, and we'll, therefore, update you quite probably in either the Q4 or the prelim.

I hope they will drop out progressively as we go through Q3, and hopefully, be gone by the end of the year, but many of them within Europe will be gone quite quickly. The ones that we have in Lat Am, we need to do a few system changes in order to release them, but yes.

Thank you. As there are no further questions, thank you all for listening to the call. And next scheduled update to the market is on Wednesday, the 9th of October, when we'll hold a conference call to deliver our Q3 2019 trading update.